Strong Cash Flow Drives Growth and Stability
Fortune Brands Innovations, Inc. (NYSE: FBIN), a leader in innovative solutions designed to transform spaces into havens, has announced its fourth quarter and full-year 2024 financial results. Despite a dynamic and challenging economic environment, Fortune Brands demonstrated resilience, delivering solid margin progress and strong cash flow. The company also announced a significant new $1 billion share repurchase authorization, reinforcing its confidence in long-term growth.
Strategic Progress and Organizational Enhancements
In 2024, Fortune Brands made significant strides in advancing its digital, brand, and organizational priorities. According to CEO Nicholas Fink, “We have laid a robust foundation for growth that will accelerate as market conditions improve.” The company’s proactive approach to organizational and leadership changes aims to enhance agility and alignment, focusing on the most promising growth opportunities.
Fourth Quarter 2024 Financial Performance
For Q4 2024, Fortune Brands reported the following GAAP results:
- Net Sales: $1.104 billion, a 5% decrease year-over-year.
- Operating Income: $178.3 million, up 33% from the previous year.
- Operating Margin: 16.1%, an improvement of 460 basis points.
- Earnings Per Share (EPS): $0.84, a 31% increase.
On a non-GAAP basis:
- Operating Income Before Charges/Gains: $181.6 million, down 1%.
- Operating Margin: 16.4%, an increase of 60 basis points.
- EPS: $0.98, a 3% rise.
Segment Highlights:
- Water Innovations: Net sales of $645 million, a 3% decline. Operating margin improved by 240 basis points to 23.5%.
- Outdoors: Net sales of $303 million, down 2%, with a significant 1,550 basis point increase in operating margin to 17.9%.
- Security: Net sales of $157 million, down 17%. Operating margin decreased by 410 basis points to 8.9%.
Challenges during the quarter included a third-party software outage in Security distribution centers, softness in China affecting Water Innovations, and the impact of hurricanes in the southeastern U.S., collectively impacting organic sales by approximately 5%.
Full-Year 2024 Results
For the full year:
- Net Sales: $4.609 billion, flat compared to 2023.
- GAAP Operating Income: $737.9 million, up 20%.
- GAAP Operating Margin: 16.0%, a 270 basis point increase.
- GAAP EPS: $3.75, an 18% rise.
Non-GAAP figures:
- Operating Income Before Charges/Gains: $780.6 million, a 6% increase.
- Operating Margin: 16.9%, up 90 basis points.
- EPS: $4.12, a 5% improvement.
Segment Performance:
- Water Innovations: Flat net sales at $2.565 billion, with a 0% change reported and a 6% organic decline. Operating margin rose by 80 basis points to 23.2%.
- Outdoors: Net sales of $1.35 billion, up 1% both reported and organically. Operating margin improved by 470 basis points to 14.7%.
- Security: Net sales of $694 million, down 4% reported and 12% organically. Operating margin increased by 590 basis points to 14.5%.
Robust Cash Flow and Strong Balance Sheet
The company showcased strong cash generation capabilities:
- Q4 Operating Cash Flow: $272 million.
- Q4 Free Cash Flow: $212 million.
- Full-Year Operating Cash Flow: $668 million.
- Full-Year Free Cash Flow: $475 million, with over a 100% cash conversion ratio.
Fortune Brands repurchased $50 million in shares during Q4, totaling $240 million for the year. The company ended 2024 with $381 million in cash and full availability of its $1.25 billion revolving credit facility. Net debt stood at $2.3 billion, with a net debt-to-EBITDA ratio of 2.4x.
$1 Billion Share Repurchase Authorization
On February 4, 2025, the Board of Directors authorized a new $1 billion share repurchase program, replacing the previous authorization, which had $409 million remaining. This new authorization is valid until February 4, 2027, allowing repurchases based on market conditions. The program underscores Fortune Brands’ commitment to shareholder returns and financial discipline.
2025 Market and Financial Outlook
CFO David Barry highlighted the company’s strategic initiatives, focusing on digital product acceleration and navigating near-term market softness, especially in the first half of 2025.
Market Expectations:
- Global Market: -2% to 1% growth.
- U.S. Market: -2% to 1% growth.
- U.S. R&R (Repair & Remodel): -1% to 2% growth.
- China Market: -15% to -10% decline.
Financial Guidance:
- Net Sales: Flat to 3% growth.
- Operating Margin Before Charges/Gains: 16.5% to 17.5%.
- EPS Before Charges/Gains: $4.15 to $4.45.
- Operating Cash Flow: $680 million to $720 million.
- Free Cash Flow: $580 million to $620 million.
- Cash Conversion: 115% to 125%.
Segment Projections:
- Water Innovations: Flat to 4% sales growth; 23.5% to 24.5% operating margin.
- Outdoors: Flat to 3% sales growth; 16.0% to 17.0% operating margin.
- Security: Flat to 3% sales growth; 16.0% to 17.0% operating margin.
Additional Financial Metrics:
- Corporate Expense: $158 million to $160 million.
- Interest Expense: $114 million to $116 million.
- Capex: $100 million to $140 million.
- Tax Rate: 24.0% to 24.5%.
- Share Count: 124.0 million to 124.5 million.
Fortune Brands remains unable to reconcile certain forward-looking non-GAAP measures to GAAP due to the unpredictability of specific charges and gains. However, the company’s outlook reflects strong strategic positioning, robust cash flow generation, and disciplined financial management, paving the way for sustainable growth and shareholder value creation.
